After two decades in which to ponder the question, abandonment of North Sea oil and gas facilities is headline news across Europe.
Short of Liz Hurley being dropped on to the Brent Spar it is hard to see how this once dry and esoteric topic could become more newsworthy.
The time has come to review recent developments and look at the environmental argument and responses to it.
What is abandonment?
It is the process by which infrastructure such as platforms and pipelines is made safe and usually removed once oil and gas recovery has become uneconomic. In the UK, this
primarily affects the North Sea.
As the word 'abandonment' has connotations of relinquishment or of leaving behind one's obligations, the word preferred by the oil industry and by Government to describe the process is 'decommissioning'.
The Brent Spar is a 65,000 metric ton structure with the capacity to store 300,000 barrels of oil in six tanks. It is 141 metres high (approximately three times the height of Nelson's Column) and 29 metres in diameter across its main chamber. The Brent Spar began operation in 1976 and was decommissioned in August 1991.
The Spar is not typical of North Sea facilities although it has served as a useful focus for the recent environmental/economic debate.
In February, Tim Eggar, Minister for Industry and Energy, announced at an Institute of Petroleum gathering: “We have concluded that the best environmental option [for decommissioning the Brent Spar] is deep sea disposal. We are fully satisfied that this option meets our international obligations and accords with our domestic legislation on dumping at sea. As a result, I have approved the abandonment of this facility at a selected deep water site. In line with our international obligations, we are
about to notify the Oslo Commission.”
On Sunday 30 April, several protesters from the Greenpeace vessel 'Moby Dick' boarded the Spar claiming it was laden with toxic substances harmful to marine life.
Shell pointed out at the time that it had consulted at great lengths and made a contents
inventory of the Spar available to any interested party.
The company also said that the total radioactivity of the Spar was roughly equivalent to a medium-sized street of granite buildings in Aberdeen. Its research showed that nothing in the Spar would have any significant environmental impact.
In early May, Sheriff Officers went to the Spar with an interim interdict from the Court of Session in Edinburgh to Shell UK requiring the Greenpeace protesters to leave the Spar. On 23 May, the protesters were removed. Shell reiterated that dumping of the Spar was the best environmental disposal option and the safest.
Legally, Shell had no power under criminal law to evict the protesters. In a neat piece of
legal fancy footwork, the company therefore placed an offshore installations manager on board the Spar who was empowered to evict people in the interests of safety under the Mineral Workings Act.
By mid-June, European protests were gathering pace as was media coverage. Helmut Kohl criticised Shell publicly. Consumer boycotts led initially by German politicians and encouraged by Dutch government ministers and Greenpeace spread throughout Europe.
Fire-bombings of Shell service stations followed including an incident at a service station in Hamburg where Shell's headquarters is based. Gunshots were also fired at a service station near Frankfurt.
On 19 June, John Major gave Shell his full backing. After further occupations of the Brent Spar and highly publicised attempts to remove the protesters, Shell finally announced on 20 June that it would abandon its plans to sink Brent Spar.
The UK Government, embarrassed by the public support it had given to Shell, announced that tax relief would not be available for the extra cost of dismantling the Brent Spar onshore. Since a licence is required for such onshore disposal the Government also stated that it may be some time before a case was made out to its satisfaction for this. The likely destination now for Brent Spar is that it will be “parked” in a Norwegian fjord pending resolution as to its final disposal. This is meeting resistance from Norwegian environmental groups.
This chronology has been claimed by some as a victory for consumers and environmentalists. Others have claimed it to be a concession to law-breaking pressure groups which has obscured the requirement for a reasoned debate of the points at issue.
Shell did everything required of it under UK and European law. The legal obligations in respect of abandonment have never been clearcut but briefly, what international law there is remains in conflict. On the one hand, Article 5 (5) of the Geneva Convention on the Continental Shelf 1958 to which the UK is a party states that disused facilities should be “entirely removed”.
Conversely, under the United Nations Convention on the Law of the Sea (Unclos), which the UK is not party to, such disused facilities may not always need to be entirely removed provided other uses of the sea are properly considered such as fishing, navigation and the environment.
Despite the UK not being a party to Unclos, it believes, probably correctly, that this reflects customary international law. The approach of the UK Government is that it fulfils its international obligations by complying with guidelines laid down by the International Maritime Organisation (IMO).
Any disposal should also accord with the London and Oslo Conventions of 1972 which are shortly to be subsumed by a new OSPAR Convention. The IMO guidelines stipulate that all facilities which stand in shallow waters (less than 55 metres) should be entirely removed. Those standing in deeper water (primarily the northern North Sea) may be left partly in place provided that a 55 metres water clearance remains. Under the UK framework a number of approvals need to be obtained before a facility can be decommissioned or abandoned. Shell had gone through that laborious process.
So what went wrong?
In short, Shell lost the PR war. Environmental concerns are of increasing relevance to world oil and gas operations.
General points of interest
There are 219 fixed structures and 9,979km of pipeline in the UK North Sea. At some stage in the future these will need to be decommissioned. A large proportion of the cost of this will be offset against tax so that in effect the general public will pay. About 60 or 70 per cent of the cost will be met in this way.
The oil industry argues that this is a fair sharing of the burden as they effectively pre-paid their tax on these developments. They also point out, quite rightly, that through various taxes they have been the major contributor to the UK economy in the 1980s.
Notably, under present rules, 75 per cent of the structures on the North Sea will require removal in any event. This figure refers to fixed structures rather than pipelines which, to date, have escaped rigorous debate. There is a view that the safest option for pipelines is for them to be flushed and sealed and left on the seabed. This is not necessarily, however, the approach that certain fishing organisations would advocate.
Shell's loss of the public relations argument underlines the increasing importance PR will have in the future. In Shell's case, recent events are a shame because they have pre-empted a reasoned debate of the issues. Shell did all it was obliged to do legally and probably more.
What it possibly misjudged was the European reaction particularly as the influence of green politics and pressure groups is greater in countries like Germany than in the UK.
The situation may never have arisen in the US where there is greater public access to such information which throws debate into the public arena far earlier. Cost is undoubtedly a factor and should remain part of the debate notwithstanding environmental concerns. The cost of bringing the Brent Spar ashore has been estimated at about £45 million as against £12 million for deep water dumping.
The entire process should be debated far more coherently, weighing costs, environmental concerns and safety against one another. Some commentators argue that there is a case for leaving all of the North Sea facilities in place until the North Sea has been completely exhausted of its reserves.
The argument broadly is that the facilities are already there so would pose no greater risk by being left. Obviously they would require some degree of supervision and maintenance. The idea is that they may be available to tie in to new discoveries which would not otherwise be economically viable were they to require an entirely new infrastructure to bring production onshore.
A case in point is the fast-track licence recently granted by the DTI for Block 2/4 in the Viking Graben area to a consortium to evaluate the West Heather prospect which, if proven, could utilise the existing Heather infrastructure and postpone its abandonment until the end of the century.
There is merit in the arguments advanced by both Greenpeace and Shell. Most people would advocate a safer and cleaner environment for themselves and succeeding generations. However, we need to explore in more detail how this could be achieved and measure it against cost and safety. Shell spent several months carefully considering its options and three years analysing these.
It also argued that the risk of an accident or environmental damage would increase six-fold by bringing the Brent Spar onshore. Much of the waste from breaking it down would be likely to end up in a landfill site.
The biggest tragedy in the absence of any measured debate regarding the Brent Spar would be if balancing all the environmental, safety and cost considerations, it was concluded that the best option for the Spar would be deep water dumping 6,000ft down on the UK abyssal plain beyond the reach of trawlers' nets.
Mark Saunders is a partner in Nabarro Nathanson's energy group.